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EXECUTIVE SUMMARY.

This research is based on Red Bull case and shows us the elements and structure of positioning, product and pricing strategies, which influence the sales of chosen product. Red Bull is a leader in the market of energetic drinks and has great experience in usage of all marketing novelties, that’s why studying of its case is very interesting and important for us. We shall examine all those elements of marketing, which have great importance for the positioning of product in the market, as well as which profit it will give to us. Studying of well-known brand will help us to understand in better way the policy of marketing strategies as well as main methods of marketing in the modern international market. You’ll find Red Bull study case and recommendations for its further marketing strategies.

 

TABLE OF CONTENTS:

1.      Formal introduction

2.      Positioning Strategy

a)        Market positioning;

b)        Differentiation;

c)        Perceptional mapping

3.      Product Strategy

a)        Product definition;

b)        Product unit;

c)        Product classification;

d)       Levels of product

4.      Pricing Strategy

a)      Pricing objectives;

b)      Current pricing strategy (Red Bull)

5.      Conclusion

6.      Recommendations.

FORMAL INTRODUCTION

Red Bull is an explosion at the market of non-alcoholic drinks. The company spent about four years to reach annual income of 10 million dollars and another five years to reach 100 million dollars. Any other big company, which would have a look at Red Bull during the process of its introduction to the market, would announce: ”There is no market. We cannot allow ourselves to spend huge advertising budget to start brand of energetic drink”. Nevertheless, this company actually created the market, being guided by a simple rule: to the time when market will be developed enough, there is no place for brand-copier.

In 1982 Austrian Dietrich Mateschitz tried in the bar of Hong Kong hotel Mandarin local tonic drinks; he liked them and he wanted to promote something of that kind at his motherland. In 1984 Herr Mateschitz created the company Red Bull GmbH, he created recipe and marketing conception of that drink and three years later started to sell Red Bull Energy drink in Austria. Nowadays Herr Mateschitz sells more the 1 milliard tins of his drinks in more then 70 world countries. Advertising companies focus attention the same effects and they didn’t change with time. In particular, energetic drink proposes to get rid of weariness and drowse, to achieve cheerfulness and to rise up vitality; to use this for work (Victoria Moore), studies and sports. In case with Austrian businessman, this drink cured him from difficulties of acclimatization

 

POSITIONING STRATEGY

Market positioning is a combination of actions securing to product (as applied to the market) position at the market, which is completely different from another market position (Positioning. For Marketing learners globally).

It means also proposal of product itself as well as its image, which will allow aim segment of market:

·         Clearly understand content of proposal and reputation of the company;

·         To understand its differences (advantages) in comparison to the competitors.

Positioning determines the way how consumers perceive the company at the market (Jan Welborn-Nichols). But in order to determine product positioning at the market, we need to understand, how the consumers, to whom the company appeals, determine for themselves value and from which components consists their choice taking into account competitors’ proposals.

 

Austrian businessman decided to promote the energetic drink first in Austria, then in Europe. In order to make this, he needed to find a new way of positioning in the market, because, actually there weren’t any other energetic drinks – he had to create completely new branch in the market.

The positioning of Red Bull in the market, its presentation at the market is quite successful even in comparison with traditional “sport” drinks. After its promotion to the Austrian market, it started to win the markets of neighboring countries. Now it is presented in more then 30 European markets, including Russia. Besides, each market is very individual: different knowledge of consumers in category “energetic drinks”, different level and environment of competitors, different pricing policies and pricing expectations of consumers of non-alcoholic drinks (Market Positioning. Marketing Basis).

 

The primary positioning – “Red Bull stimulates body and mind” – is interpreted into slogan, which is easier to remember and more interesting – “Red Bull lends wings” (Red Bull inspires). According to the last advertising campaign of 2002 they created a number of fantastic and interesting cartoons for adults, based on traditional model “problem-solving”. They also tried to advertise the brand as much as possible – to ensure the consumers that they are actually presented in the market. Twenty-three from thirty countries, where the advertising campaign was held, had advertising budget above-the-line.

The Red Bull was sponsor of number of sport programs in order to reach the market of young men and women, who lead active way of life (Anni Layne Rodgers 2001). Aim group for positioning: 16-29 years. The media-strategy also is made in such a way in order to reach very specific audience: young (or those who want to be young), active and strong (or those who want to be). A lot of radio stations for youth, innovation stations made accent to evening series of publicity as well as in the cinemas (evenings and nights).

 

Differentiation is actually, the way with help of which the manufacturers try to distinguish their product from the whole amount of other analogical products to attract the consumers’ attention (Product Differentiation).

Positioning is especially necessary, when the company uses strategy of market positioning; instead of the one position at the whole market they have to determine positions at each segment. To tell with other words, positioning strategy is instrument of realization of differentiation strategy. We need to underline, that not any differentiation of product has meaning for a consumer.

Differentiation should be:

·         unique;

·         important for the customer;

·         defensible;

·         explicable (Chapter 11, Class Notes).

 

In order to make the energetic drink different, and in order the consumers could easily remember his new product; the Austrian businessman changed formula of drink a little bit and started to bottle it into tins (different to Asian manner to sell the drinks in small glass bottles). This was the way the Red Bull was born.

Unique combination of its ingredients (the main contents: taurine, caffeine, glucoronolactone and vitamins) makes it especially effective in the period of intensive mental and physical trainings.

 

Perceptional mapping is one of the famous technologies of marketing researches, which is made with help of method of analysis of consumer preferences concerning definite product. It is a graphical model where at the axes are shown criteria of value and choice of product, which is the most important for the consumer. With help of this scheme we can see attitude of the consumers to the product taking into account several important indexes.

 

The current positioning strategy is effective: it reaches specified audience; it is aggressive – it should be aggressive because it is a product for self-confident, young, strong, energetic people. It is freedom – complete freedom of choice. They don’t force people to buy it. You can see it at their advertising – the can is always closed, so a person can always choose by himself, how much, where and when to drink. It embodies stimulation and energy for consumers, doesn’t matter what they do. It’s not a drink, it’s not a taste- it is way of life. It is an urban legend. Actually, even taste doesn’t matter!

 

 

 

 

PRODUCT STRATEGY

So, what is product? Product is everything, what can satisfy somebody’s need or demand and is proposed to the market in order to attract attention, usage of consuming. Products in the market include:

·         Material products (i.e. refrigerators, books, etc);

·         Services (concerts, hair-cuts, etc);

·         Personalities (Michael Jackson, David Copperfield, etc);

·         Geographical places of interest (city Paris, etc);

·         Organizations (church, trade union, etc);

·         Ideas (family planning, life without drugs, etc).

Product unit is definite embodiment of the product, has size, price and other individual characteristics.

 

Traditionally products are classified on basis of different characteristics. For each type of product they develop own product strategy of marketing-mix. So, depending on term of consuming and materiality of products they are classified as follows:

·         Products of short-term use – material products, which are consumed completely for one or several cycles of usage (for example, sugar, shampoo, etc);

·         Products of long-term use – material products, which are usually used for many times (washing machines, watches, etc) (New Product Marketing);

·         Services – objects of sales as actions, benefits, satisfactions, etc.

Accordingly to this classification, Red Bull belongs to category of products of short-term use.

 

Depending on sphere of usage the products are classified as:

·         Consumer goods;

·         Manufactured goods (Department of Marketing, glossary).

According to this classification, Red Bulls belongs to the category of consumer products.

 

The product consists of three main levels:

·         Core product (its physical essence – service or benefit) (Marketing Glossary);

·         Actual product (package, brand, components, quality, etc);

·         Augmented product (additional services).

 

 

As far we can see, the core product in Red Bulls can be named energy, high working ability after you drink Red Bulls, increasing of mental and physical activities, slaking, etc. The actual product here is its brand name, package (light silver tin, which is original, esthetic, has good functionality, doesn’t cost a lot, has advertising effect itself and provides safety of product from the moment of manufacturing till the moment of purchase and consuming of product; it also gives us convenience during realization of commodity; it is possible to be recycled), components (containing caffeine), quality of product (good taste, etc). We don’t have here a lot of additional features, because it is a product of short-time use, which is being consumed within one-two times as energetic drink. It doesn’t need after-sale service and warranties, except of warranties that the product should be consumed before expiring date.

 

Speaking about branding strategy, we can tell that it is a way to arouse the necessary emotional hidden motive of consumer, from which consists, actually, the very concept of brand. For example, brand positioning of Red Bull: I’ve never seen Red Bull just laying on the supermarket shelves: it always is inside of stylish refrigerator in form of that Red Bull tin, where the energetic drink is kept. And, when I buy the product, I have positive emotions – also because that it is very pleasant to take the tins from such a refrigerator than from ordinary shelf. Here are other secrets: Fridge in form of tin and company’s logotypes works as a good eyes-stopper. Unusual construction attracts attention even if a consumer doesn’t have good knowledge of the product. And the manufacturer received two benefits: interest to product and positive emotional index. As well as well-thought “package” brigs economy into manufacturers’ budget: he doesn’t need to spend additional money for additional pointers indicating where the product is kept.

This is a new type of branding strategy, a speed in the can.

The brand name is Red Bull – the logo of product contains picture of two huge red bulls with strong necks at the background of bright-yellow sun – by opinion of brand creators, this picture was a symbol of energy, manliness and warlike character. In addition to this direct publicity, the manufacturer actively sponsored extreme kinds of sports and rave-parties, in such a way underlining that his energetic drink plays for a consumer a role of “additional adrenalin”. It is energy, which inspired body and soul. The brand name is effective, because it symbolizes the idea, which is the essence of brand creation; the product strategy is also effective, because it depicts the essence of energetic drink and the essence of the whole marketing company – it gives to a consumer a special energetic way of life – power, energy, freedom and independence.

 

 

PRICING STRATEGY

In majority of countries-markets Red Bull the average price for a tin is approximately EUR 1.5 – I can suppose that it shouldn’t arouse delight of consumers. Still, the price for energy drink of other manufacturers, such as Red Devil, Red Eagle, White Horse, etc are at the same level. For example, in comparison with “Coca-Cola” its price is three times more expensive. So, Red Bull should be really good, – in the other way nobody will buy it!

 

Pricing objectives usually manage the whole price process (Pricing Strategies). You should take into account:

·         The common expenses (marketing, financial, strategic objectives of firm);

·         The objectives of product (brand);

·         Prices, oriented for consumer (pricing points, price elasticity);

·         The available resources you have (Pricing strategy).

 

Actually, pricing strategy determines on market aims of company and stage of life-cycle of product (For example, Red Bull has aim of long-term position at the market, oriented for young people. As far as the product (brand) is different from ordinary, the price shouldn’t be at level of ordinary non-alcoholic drinks. Still, there are some pricing objectives which can be applied to the product – for example, ‘to create interest and excitement about the product, to discourage competitors from cutting prices, to maintain price leadership’ (Pricing objectives p.1)

There are several factors which influence pricing policy and strategy in Red Bull’s: the demand for product is high (it is youth product, which is positioned as energy), the type of market and type of consumers affect the price; the promotion for product is heavy and aggressive; the product is well-known and easily recognizable; the company positions the product for prestige.

The pricing strategy for Red Bull is seemed to be an oligopolistic competition – there are several sellers at the market, they are quite sensible to prices of each other and other marketing strategies. They don’t need to use price increasing in that way and long term price cuts usually take place (The marketing Mix – Price p.1).

The current pricing strategy seems also to be successful. There are several manufacturers at the market; the company doesn’t have great competition. The product is positioned as a product of prestige, a special product, the supplement, which gives better life, full of energy. The special positioning of brand allows to have comparatively high prices and to receive profit. It is a kind of fashion brand. The question of prestige.

 

CONCLUSION

It is one of the first brands, which almost didn’t use aspirational tactics: you’ll never find sex or ‘hips’ in advertising- it can be only in the consumer’s mind – the drink seduces, but it promises only a burst of energy. It is the product which created demand first, before availability.

We can call marketing strategies, used for Red Bull, successful. Taking into consideration all strategies – positioning, product and pricing, we can see the progress in sales. For example, in Great Britain, in spite of high competition with trade mark Lucozade, sales are increased for 185% in 1998 (in comparison to 1997), and for 315% in 1999. In the same Great Britain in 2000 the sales exceeded 1 milliard dollars. The knowledge of consumers about brand reached more than satisfactory level (spontaneous from 9% till 25%, inducted – from 28% till 63%). The sales in Germany in 1998 were increased for 42% in comparison with 1997; in 1999 – for 61%. Share on the market was increased for 4% in 1998 and for 5% in 1999. Sales in Sweden were increased for 40% (1998) and 74% (1999). In Belguim: sales increased for 87% (1998) and for 71% (1999). Knowledge of brand was increased for two years in more then two times. In Portugal sales increased for 40% (1998) and 28% (1999). They reached share in the market of 98%.

 

 

RECOMMENDATIONS

According to aforesaid, we can recommend to Red Bull the following:

·         To strengthen and to increase understanding of the very concept “energetic drink” by the customers;

·         To position Red Bull as energetic drink which is trustworthy and which influence to organism is favorable;

·         To unite the consumers by way of communication with the main values of brand (individuality, humor, innovation, non-conformism).

 

Really, this product is well-positioned; it is the leader in the market. It is a burst of energy, a way of life. I want to finish my report by words, which you can meet anywhere in the street, in the supermarket, whenever you go, you can see: “Don’t you wish you could be one of us? Well, buy…”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Works Cited:

 

1.      Alex Wipperfürth, “SPEED-IN-A-CAN: THE RED BULL STORY” [online] http://www.plan-b.biz/pdf/Speed_In_a_Can.pdf

2.      Pricing objectives p.1 [online] http://www.fact-index.com/p/pr/pricing_objectives.html

3.      The Marketing Mix- Price p.1 [online] http://www.buseco.monash.edu.au/depts/mkt/mtp_online/externalfactors.php

4.      Energy Crisis DRINK, magazine article by Victoria Moore; New Statesman, Vol. 128, November 22, 1999

5.      Positioning. For Marketing learners globally [online] http://www.learnmarketing.net/positioning.htm

6.      It’s a (Red) Bull Market After All, from Web-Exclusives , October 2001 By: Anni Layne Rodgers

7.      Market Positioning by Jan Welborn-Nichols [online] http://www.zeromillion.com/marketing/ten/marketing-positioning.html

8.      Market Positioning. Marketing Basis [online]  http://tenonline.org/art/mm1/9305.html

9.      Pricing strategy [online] http://66.102.9.104/search?q=cache:syXBmii9cMIJ:www.netmba.com/marketing/pricing/+pricing+strategy&hl=ru

10.  Product Differentiation [online] http://en.mimi.hu/marketingweb/product_differentiation.html

11.  Pricing Strategies. Advanced Marketing Consultants [online] http://www.marketingprinciples.com/articles.asp?cat=364

12.  Chapter 11, Class Notes [online] http://www.udel.edu/alex/chapt11.html

13.  Marketing Glossary: Core Product (Marketing Core Product Help) [online] http://glossary.reference-guides.com/Marketing/Core_Product/

14.  New Product Marketing: Need Help In Marketing A New Product? [online] http://www.marketingprinciples.com/productmarketing/default.asp?cat=122

15.  Department of Marketing, glossary [online] www.buseco.monash.edu.au/depts/mkt/dictionary/ppp.php

 

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